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Tuesday, May 28, 2013

Inside Electronic city in Bangalore, where there are
thousands of IT professionals working, there is a new facility that has just
got inaugurated by a company called Uniworld (http://www.uniworldindia.com/). It is a studio apartment complex with about
720 fully furnished studio apartments that comes with additional facilities like a cafeteria, laundrette,
gym, lounges, gaming zone, 2/3 home theatres, WiFi, 100% power back up etc. This
complex is meant for working professionals. The room rent starts at Rs. 5500 (on
twin occupancy basis) and it is truly premium in the way it is built, furnished
and managed. I have known the person behind this venture (Mr. Kush Shah) for
about 18 months and I have recommended this investment opportunity to my most of close friends
last year and many have invested in the property.Yesterday, I had visited the complex, for the
first time after inauguration in mid April and I sure am impressed - you can
see some of the photos shot by me here.

For an investment of appx. 10-11 lacs, you can own one apartment
-this apartment will be managed by the company (Uniworld) and will be rented
out to working professionals. 75% of the rentals are returned back to investors
every quarter and this works out to appx 7-9%. This is pure passive income on
an investment secured by immovable asset. The rental income is paid back on a sharing
basis –hence, even if your specific apartment is not rented, you will surely get
a rental income as long as other apartments are rented out.

The location is so good that there are lots of flats coming
up in the same road and the property rates in the area will surely go up by about 15% per
annum as there are lots of IT jobs in that area.

Hence as an investor you will get a 7-9% return as passive
income and also a capital appreciation of around 15% per annum.

So these are all the reasons why one must invest here.

There is one key risk elements here that needs to be mentioned
– the key risk element is mis-management of the complex that could result in the
rentals dropping and also lowering the value of the property. Kush Shah, who is
the man behind the complex, along with his family, owns about 200 of these
studio apartments (out 720 apartments) and has a pretty high stake in the
success of the venture. Plus I believe that he has the ability to manage such a
venture (that is my opinion though).

Also this is legally not a residential property and is, I
think, classified as a “Hostel” – so you cannot get a home loan for this
investment.

Despite these negatives, I believe it is a good investment
option and I recommend it whole heartedly to all my readers. Many of my friends
from across the globe already own apartments here. As the complex is almost ready, there are just
about 10 studio apartments left for investors – so if anyone of my readers want
to reach out – you can write to me – or better
still, you can reach out directly to Mr Kush Shah or Mr Deshpande at ir.uniworld@gmail.com.

Sunday, May 26, 2013

Here is an act that I normally do not recommend - but I must confess that I am thinking about it.

To buy or not to buy India cements stock - the stock has gone down due to bad news from IPL. The stock has fallen from Rs. 87 to Rs. 71.5 in tha past 5 days -about 18%.

I believe that this price drop is reactive and I believe that there is an opportunity - a short term opportunity - over time I believe that the stock will stabilise at it's 200 day moving average of around Rs. 85 - but right now the stock is down.

The likely scenario that will play up is the Srinivasan will survive as the BCCI head -till his term ends. Plus India Cements as a company is doing steady even though the cement industry is not doing well overall. Plus this year's IPL is almost over and all the revenues and costs would be accounted for till the next year.

So is the market reaction justified?

Well take you call. I am just trying to seed a thought in your mind right now.

If you have any data /views on this issue - please do give me your comments in the area below

Thursday, May 16, 2013

There is lots of low cost money floating around globally –searching
for good investment opportunities. US,
EU, Japan, Australia, S Korea, and many more countries including India have
reduced their interest rates or maintained low interest rates since Jan 2013. This low cost capital is
an opportunity for companies to borrow at a low rate and invest in creating
productive assets (read capacity expansion) –which will in turn create economic
growth. It is happening to a small extent – but most of this excess cash is ending
up in speculation and in high risk assets like stock markets. A part of this cheap money is coming into
Indian stock markets through the FII route and this is the reason for the highs
that we saw yesterday.

Globally - most stock markets are at a high right now. What
is happening in India is a global phenomenon and we are just bystanders – we
can see it, but we are not the real players.

In India, the retail
investors (people like you and me) are wary and not investing in stock markets right
now. In fact even the Indian Mutual funds, are selling stocks over the past 3-4
months.

So what should you do? Do nothing – just watch.

The markets will be choppy this year. I expect the Indian
markets go higher than ever before in 2013. Currently, our market PE is around 17.5
- our PE was around 21 in 2008-09 before the crash. So we are not too over
priced yet. There is scope for the Indian markets to go higher and with the cheap
money sloshing around, I expect the markets to go further up in the coming months.

We should be wary of entering stock markets now – do not invest when the markets are high. If
you want to exit and encash your profits – do it, but not today.Wait for some more time. Even though we
cannot “time” the exit – I believe the market is destined for higher levels. You can exit then.

I do not plan to exit though.

Keeping a 3 year time frame, I am wary of investing in stocks
currently. I intend to keep most of my liquid capital in debt funds (long term
debt funds where we need to have a 12 month lock in). I will surely keep some cash at hand – you never know – life is full of opportunities and something always turns up round the corner.

Tuesday, May 7, 2013

Searching for good equities at the right price is a waiting
game – one has to wait patiently.

Over the past few months, there is news of more quantitative
easing from Japan and Korea, the US stock markets are at an all time high, the
US real estate market looks postive, the jobs data in US is starting to look OK, there
is a seeming calm in the EU but the Indian political scene is unstable and does not give much confidence in the short term – with such good and bad news coming in, the
Indian stock markets have to be volatile.

In the past 2/3 months, I have invested in Gruh Finance, Jubilant Food works and
Nesco. All these companies are good companies, but their
current valuations are high. I still
went ahead and invested as I believe that over the next few years, the valuations
will stay high due to the low interest rate regimes globally and India growth
story.

Having said that, this time I am investing through
two sectoral mutual funds.These are in
sectors that are fairly ever green – these sectors are here to grow as the
Indian GDP per capita grows. As Indians grow
richer over time (or less poor over time), the FMCG and the Pharma sectors will
do well.Riding this wave are a few
mutual funds that have given very good returns in the past few years.

In the FMCG sector, there are two funds of which the ICICI Prudential FMCG fund is the bigger one – it still has a fairly small asset base of Rs. 214 crores. As the sector is doing well,
this fund has given an ROI of 17% compounded
per annum for the past 5 years and 25% compounded per annum for the past 3
years. The fund manager manages about Rs 2500 crores worth of funds, of which
this is his best performing fund. I have decided to invest in this fund with a
3 year plus time frame

There are three pharma sector funds - of which the Reliance
Pharma fund is the largest with an asset base of Rs 675 crores.This fund has given 23% per annum compounded
over the past 5 years and 12.5% per annum compounded over the past 3 years.The fund manager manages about Rs 5000 crores
worth of funds, of which this is his best performing fund. I am investing in
this fund also with a 3 year time frame.

Amongst the two funds, I am betting more on the FMCG fund – that
story to me is a more positive story. Having said
that, I do believe that the pharma story is also a good story to place your
bets on. I normally aim at 15% plus tax free returns in
whatever I do – and I am hopeful that these funds will meet my expectations.